As the demand for GLP-1 weight-loss drugs surges, major corporations, including Delta Air Lines, PepsiCo, Philip Morris International, and Darden Restaurants, find themselves fielding questions about how these medications may affect their financial performance. However, executives across various industries are cautiously addressing the issue, citing the early stage of the drugs’ adoption. Companies like Hershey, Conagra, and Nestle are reassuring investors that they will adapt to any potential changes, should they become necessary.
While some analysts are making sweeping predictions about how obesity drugs will reshape the sectors they cover, the reality remains uncertain. It is not yet clear how many individuals will actually embrace these medications, for how long, or what lasting impact they might have on the food production, restaurant, and other industries.
These drugs, known as GLP-1s, initially received approval for diabetes treatment and are now being employed to combat obesity. Demand has skyrocketed, with Novo Nordisk struggling to meet the demand for its drug Wegovy.
Despite the increased interest, only a small portion of eligible individuals currently use these drugs, as observed by Goldman Sachs analyst Chris Shibutani. Shibutani estimates that this number could rise to 13% of the approximately 100 million Americans with obesity by the end of the decade. This translates to approximately $100 billion in sales, but the actual figure may vary significantly based on various factors, including the duration of drug usage.
Shibutani emphasized that the question of how long people will stay on these drugs is a crucial consideration when evaluating the market’s potential size and its ripple effects on other industries, such as food and beverage, consumption patterns, and competition for discretionary spending and luxury goods.
A month’s supply of Wegovy, for instance, costs approximately $1,400, and insurance coverage varies, making it a costly option for many prospective users. Additionally, Wegovy and similar drugs can induce unpleasant side effects like vomiting and diarrhea, deterring some individuals from continued use. Data from RBC Capital Markets indicates that only about one-third of people who initiate these drugs still take them a year later, suggesting that their impact on other industries might not be as profound as some anticipate.
RBC analyst Brian Abrahams pointed out that expectations of a miracle cure affecting tens of millions of people and dramatically altering various sectors may not align with reality. The pharmaceutical products have their limitations, including issues related to reimbursement and compliance. The true outcome often falls short of initial predictions.
At the same time, the story of weight-loss drugs is only beginning to unfold. Wegovy received approval just two years ago, and numerous weight-loss drugs are currently in development. Eli Lilly’s tirzepatide is expected to receive approval before the year’s end.
It appears that we are in the early stages of a journey where the impact of these drugs will become clearer as manufacturing advances, next-generation mechanisms emerge, and payers make decisions. Consequently, it is expected that the theme of weight-loss drugs and their effect on various industries will persist for some time.
